In a furious battle for investments in southern India, businesses are being charmed by an old persuader. The big loser in this combat appears to be Karnataka, whose chief minister, Siddaramaiah, has just not been able to communicate an industry-friendly image. So far, the chief minister’s attempts to bring in investments look clumsy and half-hearted.
The old influencer is none other than Chandrababu Naidu, chief minister of the newly formed residual Andhra Pradesh state. In south India, which now has five states, Naidu is leaving nothing to chance as he goes about luring investors away from the neighbourhood. Naidu is particularly single-minded about snatching away IT and technology companies from Karnataka, as well as enticing manufacturing companies from Tamil Nadu. In this, he is leaving his Telangana counterpart far behind.
The battle for IT investments offers some déjà vu moments. Karnataka, with S.M. Krishna as chief minister, had fought a pitched battle for new IT investments with then Andhra Pradesh Chief Minister Chandrababu Naidu in the early 2000s. It was a clash of equals, as the suave Krishna held his own against the charm offensive by Naidu. Nevertheless, Naidu, with his fire-in-the-belly attitude and I-mean-business style, had managed to attract companies like Microsoft to set up in his state. Even Prime Minister Narendra Modi is said to have learned early lessons from forerunner Naidu’s business savvy during his chief ministerial stint in Gujarat.
The Karnataka versus Andhra Pradesh scenario has changed somewhat a decade and a half on. Investors were unnerved by the prolonged Telangana agitation in Andhra Pradesh but Bangalore, meanwhile, further consolidated its status as India’s technology hub. It now accounts for 40 per cent of all Indian IT output. It has since added a further tech dimension by turning into a nucleus for entrepreneurs. Meanwhile, Naidu has made a comeback in the residual Andhra Pradesh of the bifurcated state and is going about recapturing his old groove.
The deficiencies on each side are glaring. For Karnataka, it is the lethargic Siddaramaiah, too caught up in his own internal party and government flare-ups to devote any time to real administration or strategy. As a case in point, Siddaramaiah has practically scrambled each time the aggressive Naidu has come into Bangalore to brazenly woo tech multinationals and Indian IT firms away. Andhra Pradesh has a go-getting chief minister but the state has to build everything from scratch, including a capital located in the middle of nowhere, lacking even a minuscule slice of Bangalore’s niceties: great weather, a cosmopolitan culture and a large talent pool acting as a magnet for global companies.
For Siddaramaiah, it is a long list of didn’t dos. A 10,000-acre IT investment region has been in the works for years in the northern Bangalore suburb of Devanahalli, close to the airport, but the government has provided no infrastructure there — not even drinking water and road connectivity. So much so that even a native Bangalore company like Infosys, which had paid an initial sum and waited four years to base its expansion there, has demurred and is demanding a refund.
It is almost as if the shrewd Naidu was waiting for just this opportunity. Naidu is a frequent visitor to Bangalore, where he meets not just large firms like Cisco and Flipkart, but also start-ups and incubators. The progressive chief minister is offering to set up an IT park at the Andhra Pradesh border, 80 km and a couple of hours driving distance from the Bangalore airport. You have to hand it to the chief minister and his strategy team. On the other boundary, Naidu is pushing manufacturing firms to relocate from Tamil Nadu and elsewhere to Tada (in Nellore), which is again 55 km and less than a couple of hours driving distance from the Chennai airport.
In this way, the Andhra Pradesh chief minister has both bases covered. Naidu has been promising land without registration fees, a single-window agency to accord business approvals and a lenient tax regime. He scored his first win by courting Hero Motorcorp’s greenfield two-wheeler manufacturing facility away from Karnataka. His hands-on approach — including travelling to Davos to meet and woo tech CEOs at the World Economic Forum — is in contrast to Siddaramaiah’s lassitude.
And what has the Karnataka chief minister done in the meantime? In the face of Naidu’s repeated “incursions” into Bangalore, Siddaramaiah has protested the Central government’s income tax and excise duty concessions to Andhra Pradesh, saying it un-levels the playing field for IT investments. But such protests merely serve a political purpose. If Indian and global firms are setting up or expanding in Bangalore, it is because of the city’s many pluses, despite its serious lack of political leadership.
Whether Siddaramaiah likes it or not, industry and businesses will continue to gravitate towards regions with responsive leaders and the best investment ecosystem. It is time he woke up and sniffed the stale investment climate his government has furthered in Karnataka.